Following the additional tax on individual dividends above Rs 10 lakh from April 1, the street has begun pricing in a significant dividend payout in March.

Companies including Bajaj Auto, Hero MotoCorp, TCS, Mindtree, Dr Reddy’s and Bharat Forge may rush to cut the tax bill in the hands of large shareholders, including promoters, by declaring interim dividend.

According to data from Bloomberg, the near-term futures contract prices of the high dividend paying companies such as Page Industries, Mindtree, Hero MotoCorp, Bajaj Auto, TCS, Just dial and UltraTech are trading at 1-6% discount to spot prices.

The increasing futures market discount shows the extent of dividend market is pricing in for March.

For instance, Hero MotoCorp’s March futures is trading at Rs 2,787, which is lower than its spot price of Rs 2,835 on Friday.

Its futures price was Rs 17.24 higher on average than the spot price in the past six months.

The current discount reflects that market is expecting interim dividend of Rs 48 per share in March.

In the last fiscal, HeroMoto had paid a dividend of Rs 60 per share, which was 50% of earnings per share.

The March futures on the Nifty is trading at 25 points discount to the Nifty spot level as compared to 27 points average premium in the fifteen days prior to the Budget day.

Going by the stock exchange rule, a company has to serve a notice of 15 days before calling for the board meeting.

It means, companies which want to declare interim dividend in March, need to notify the date of board meeting to exchanges in the next five days.

In fact, segment leaders like Maruti Suzuki, Tata Motors and Hero MotoCorp have reported de-growth of 34.3 per cent, 45 per cent and 20 per cent, respectively giving a clear indication of a prolonged slowdown in the sector.